Riding On Momentum

Formerly i had wanted to talk more about the levels of gold that one want want to get into for a higher probability level but the data released regarding GDP strike me yesterday as lies and manipulation as they try to give people the feel good factor.

Take US for example
Preliminary GDP 3.5%,Revised GDP 2.8%, ACTUAL GDP 2.2%

When the preliminary GDP was out,everyone was talking about how good U.S has become,we are out of recession blah blah blah,but what's the actual GDP? it's a measly 2.2% and they chose to released it in light trading period when volume is light. Remember LIGHT Volume FAVORS THE UPSIDE

I was talking yesterday with a friend and we suspect that most of the initial numbers were false by a ridiculous amount. The Government came out with numbers that BLOW off the analyst and they revised it down later while releasing NEW Mind Blowing Beat of expectations data to allow people to continue to keep the feel good factor. Government HOPE that time will solve the problem but eventually it is more likely it will cause a bigger problem but in the meantime,doomsday is averted however there are still many risks ahead for us.

It is not only U.S alone in these,if you follow the economic release you will realize most countries OVERSTATE their growth ONLY to revise down DRAMATICALLY later and Repeat after me,the Growth is generated after HUGE GOVERNMENT SPENDING. It is not supply/demand,it is not private consumption or consumer consumption. It is ARTIFICIAL Government Consumption that is beefing the numbers

Will it be the same again in 4th Quarter GDP that will be released in 1st Quarter 2010?
I believe so,they will likely bump up the numbers AGAIN to keep the partying going before revising it down drastically later on. How long can they keep it up? I seriously don't know but judging from the numbers alone,i will assume that stimulus will not be withdrawn so fast given the fragile nature of things. Hence there may still be upside in the market in the 1st Quarter and contrary to what most people say about inflation,i foresee the scenario of deflation in the first half of 2010 as more likely and it will warrant more money printing and more artificial forces in play. Things are still bad however we are not in a normal functioning market.

Below is an extract from Inthemoneystocks.com latest report
Market Flash:

Three days before Christmas and the volume is light
Exxon Mobile(NYSE:XOM), the Spyders(NYSEArca:SPY), and Apple(NasdaqGS:AAPL) are doing all right.

While gold(NYSEArca: GLD), and oil(NYSEArca: USO) have caught a small bid
however, for them to move higher the dollar must have had an intra-day skid.

Goldman Sachs(NYSE: GS) is trading down less than a buck
with $20 billion in bonuses do they really need luck.

Other banks are basically flat on the day
why should they be down they took 'mark to market' away

Remember toxic assets are a thing of the past
Where did they go? Did they just vanish like gas?

What does it matter the market is higher.
Stocks like Dollar Thrifty Automotive(NYSE: DTG) are now a high flier

I remember in March when it was under a buck
Now it is $27.00 this isn't just luck

Wall Street is fine for all to see
we must thank the 'Man of the Year' Ben Bernanke.

He followed his predecessor Alan Greenspan
by lowering rates throughout the land

We all know this was the cause for the 'Great Bubble'
One can only wonder will this one be double.

I'm going to send out an email to people in my list today in regards to the idea of what may happen in 2010(The email will not be written by me but from the sources i follow) and i will update in a few days time on the probable level to get into gold because i see a fairly strong case for gold strength in 2010-2012. It does not mean it's a Buy straight away because things can change,the only thing we want is 1) Getting in at a good price because the price is equal to your profit/loss 2) If things change and we are still long in gold. Take Profit and exit.

This is a follow up of my previous post to share more of how to spot Accumulation because no matter it is 1) More buyers than Seller or 2) Big buyers it will both reflect in the chart.

However,there is a limitation to the amount of information you can gather from it from the charts alone.

Stock prices fluctuate MAINLY due to supply and demand and this is all we need to understand to make good trades.

I've shared about support and resistance and you will know that Areas whereby multiple support confluence(Comes together) are STRONG,support where a BIG Move occur are STRONG. Refer http://chartsdontlie.blogspot.com/2009/12/how-to-identify-strong-support-and.html or the stockcharts link by the sidebar for more details

COMBINING support/resistance,supply/demand is all you need to know to get into good trades. You can have other indicators to affirm your decision but it's up to you which ones you want to use.

I will just talk more in depth on the SUPPLY/DEMAND

How do we determine SUPPLY/DEMAND?
Beside taking the support/resistance into account,just from the words alone you will know that Supply refers to people selling and demand refers to people wanting to buy.

For accumulation to take place,using the charts we can put a 60 day Chaikin Money Flow(60days is about 3 months and these are the amount of time needed for accumulation) You can use other settings,it's mainly up to you depending on your timeframe.

What you want to see is accumulation but it does not mean that price needs to go up before accumulation takes place



Can you see the 2 lines?
Price making lower low,CMF making higher low. Accumulation!! These are the high probability trades. You can put those on your chart now and i'm sure you won't like what you are seeing right now.

We are no longer in accumulation mode at the time being which is why i'm bearish. However distribution does not mean it'll fall right away,it could be another couple of months before it happen. It has held on far longer than i expect but well this is the market and market is always right. Can it go up further,probably. Will it drop? Eventually yes but as i've mentioned time and again,it is not whether it's going to go up or down that we are all interested in. It is WHETHER when we bet on a direction,we are right or not.

Stocks are the place to be for medium term but it does not mean you should just buy any stock thinking it'll go up,because it becomes a game of hope. We should not risk our money on hope alone or on rumors alone or even for fundamental because fundamental changes and whether you will make money or not also DEPEND ON THE PRICE YOU GOT IN.

To sum up,DIVERGENCE in CMF(Chaikin Money Flow) will SHOW YOU whether a stock is being accumulated.(If you don't understand divergence,you can probably google divergence in stocks for more information)

Convergence in CMF may be accumulation also but the probability is lesser hence we can use another way as confirmation.

As i've stated accumulation is when buyers is more than sellers. Keep a excel spreadsheet of a number(5-10 will be sufficient) of liquid stocks(meaning everyday there will be decent volume of at least 5,000 lots and above) that you can interested in and go to your trading platform and open the trade summary for it. Key the number of buyers and number of sellers and the price change for that stock into your excel spreadsheet. Generally More buyers than sellers is a GOOD SIGN now this is the part that you can't see from charts but this is CRUCIAL information that will aid you in timing.

It can be useful in a number of ways. For 1,let's say a stock has been consolidating for a couple of MONTHS and you keep seeing more buyer than seller in this stock. What does this tell you? You will want to look at this stock and buy at support and WAIT for it to breakout and ride with a trailing stop. It'll be slower but hello,this is passive investing,you will get more than 10% for doing this(how much depends on how far it goes). If you are still not contented with it. I don't know what you will be contented with. However these kind of situation are lesser which is why these are the hugely profitable and low risk picks that you will want to look out for. In Technical Analysis term, we call these the SQUEEZE Trade.

The other place this can be utilized is when a trend is in place and it retrace to confluence of support,let's say it's a price support + a fibonacci support. If you see more buyers than sellers when it's at this kind of level. What does it tell you? People want to get in because the path of least resistance is UP. So what should you be doing? You should buy!!

In theory,most of what i said sounds very logical but how do you know what you should do when you encounter this kind of situation? For 1,you can email me wlk77@hotmail.com so that we can discuss together i may not always be correct because this is about probability. I am just seeking to be right more often than wrong.

Why am i willing to do this when i don't charge or anything?
For 1,i don't monitor all stocks so likely i'll miss out lots of opportunities,but with more people looking out,it will come up to more opportunities.

I share my knowledge because all these are knowledge that you would have gained if you spent enough time reading or enough money paying those courses and end of it you will find that what you will learn from those courses are basically similar to what i'm sharing with you.

This is a site whereby i want to network with people and we can look out for each other. Nobody is infallible,everybody will have different opinions and only time will tell who's right and who's wrong. We CAN'T control the market but we CAN CONTROL OUR RISK THAT WE ARE WILLING TO BE EXPOSED TO

I don't know what will happen in 2010 whether it will be another bull year or a very very bear year that i had mentioned previously although i've shared what i believe with happen with those that had asked me. Whether it will materialize,i do not know i will just react and update when new things come up.

Stay safe and PROTECT YOUR CAPITAL